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PIA’s Free Fall

The last time we discovered that the national flag carrier, Pakistan International Airlines was a burden to the economy early in 2016, two men died in the protests surrounding the proposed panacea of privation. The process got stalled at least for six months. Six months turned into a year, a year is running towards the second, but as of now, PIA is officially a burden once again.

At its November 2, 2017 meeting, the Privatization Commission decided to “reinitiate” the process of privatizing PIA – a commitment made by the Pakistan Muslim League (PML-N) government with the International Monetary Fund(IMF) when it secured a 6.2 billion dollar bailout.

A mammoth organization buried under 300 billion rupees of debt, PIA has been spared privatization in 2016 after it was converted into a public limited company (PIACL) by a joint session of parliament. This was despite the fact that the airline has one of the highest employees per plane ratio – there are currently 29 aircraft operating for PIA, including three on wet lease. Over 13,700 permanent employees and 3,700 daily wagers employed through third third-party vendors are engaged in various services relating to daily operations. The law converting PIA into a public limited company was called the PIA Conversion Act, 2016, and included a bar on the federal government trying to transfer ownership of the entity. What could be sold was the management of the airline, ownership would always stay with the government as they would retain a majority share with 51%.

The Privatization Commission is now seeking a reversal of this rule because it would pave the way for the government to sell ownership, and not just management of the airline.

Without a doubt, PIA is jetting towards doom. Which begs the question; has there been such little turnaround in the fortunes of the national flag carrier that it remains a priority to sell? And who is responsible?

No doubt the resumption of the privatization process will spark labour protests once again – a sub-plot centres round the PIA unions’ support (or lack of it)to the PML-N. Talk of privatization is seen by labour leaders as an attempt to rein them in. But in truth PIA’S troubles go far beyond the everyday operational issues or ordinary workers’ resentment at being taken for a ride. The big issues lie elsewhere.

The man in the PIA cockpit is Irfan Elahi, the chairman of the organization. His tenure is marked by a number of murky deals and practices that have either seen the bypassing of PIA bylaws or decisions made to the outright detriment to the organization. Some of Elahi’s choices have had larger consequences to the organization, to the extent that the last PIACL board of directors meeting boiled over after a director questioned him about some deals struck.

Let’s suppose Elahi is exceeding his boundaries as chairman of PIACL board of directors, the question really is who can possibly stop him? The board, perhaps. And if they fail, the Aviation Secretary of the Cabinet Division Secretariat.

Irfan Elahi, ex-Squadron Leader PAF

Here’s the twist: how can someone summon themselves – Elahi is also aviation secretary.

The conflict of interest is perhaps not his fault. But when life gives lemons, make lemonade.

Although bureaucratic nonchalance comes with the territory, hiring and posting irregularities – an almost universally accepted baseline for nepotism – is the least of the allegations against Elahi. The big charges relate to the concentration of power, the operational opacity this omnipotence allows, as well as the siphoning of taxpayer money to companies abroad without receiving any services in return.

The allegations against Elahi also relate to certain power wielders (and their relatives) benefitting on account of the national flag carrier. They have to do with a plane that went missing in Pakistan, only to pop up in Germany. They also relate to the acting chief executive officer, a German, who has a criminal case against him in Pakistan courts but cannot return to the country to testify – allegedly at Elahi’s behest.

The following four stories have largely been extracted from official PIA paperwork and correspondence that were exchanged, copies of which are available with Eos. Each story points to instances of how damage was dealt to the interests of the national flag carrier. The common link is Irfan Elahi, the man in whom trust was reposed to steer PIA away from turbulence.

The Case of the Pakistani Aircraft that popped up in Germany

Central to all allegations about a plane that went missing and popped up in Germany is former Acting Chief Executive Officer (CEO) Bernd Hildenbrand.

To recap: an Airbus-310 (A310) that was owned by PIA was first rented out to a film company by Procurement Director Air Commodore Imran Akhtar, brother of former Director General of the Inter Services Intelligence (ISI), Rizwan Akhtar. The plane was flown to Malta for the film company.

The A-310 was a “fly-worthy” aircraft. And yet, with it having been taken out of service for filming purposes, it never returned to PIA fleet. Three departments – Marketing, Finance and Corporate Planning were entirely bypassed by the Procurement Director. And the plane itself landed in Germany, in Leipzig, to be displayed at a museum.

Till recently, PIA had been claiming that the plane was never sold in the first place and it still had ownership of the plane. In truth, Akhtar removed Operations, Engineering, Marketing, Finance and Corporate Planning from the loop and made the transaction without any kind of approval from the board of directors. The plane had working auxiliary power units, avionics and landing gear, among other parts. The film company offered 245,000 Euros for the aircraft while the German museum charged 45,000 Euros in marketing fees for displaying the aircraft at their museum.

The issue was raised in a Senate sub-committee session. This was attended by Irfan Elahi , 13 senators including Muzaffar Hussain Shah, General Qayyum, Farhatullah Babar, Mushahidullah, Sherry Rahman and others.

Senator Saleem Mandviwalla took the dais with documents claiming that just the fuel cost incurred by the national flag carrier was far greater than the sum paid by the film company . While Bernd Hildenbrand is accused of having flown the plane to Germany, the role of Imran Akhtar has escaped public scrutiny. He could only have used the aircraft if he had the permission of the Civil Aviation Authority Pakistan (CAA Pakistan) to do so. And he did: writing to the Civil Aviation Authority, even though that wasn’t his job to begin with. And to make matters more complicated, well-placed sources claim that influential quarters are now trying to have that letter expunged from the records so as to camouflage the act.

How did he get away with it?

Because at the helm of the CAA Pakistan is a friend: Irfan Elahi, also the chairman of PIA and the aviation secretary.As the clamour increased at home about where the A-310 had disappeared, an inquiry was set up to probe the matter. The inquiry report was finally penned by two officers, Legal Advisor Ahmed Rauf and Chief Internal Auditor Javed Mansha.

They held Hildenbrand and Akhtar responsible for the fiasco, asking the latter why he initiated the loan and sale of aircraft when he wasn’t authorized to do so in the first place. The probe report raised questions about why the three departments that should have been in the loop for the sale of the aircraft were bypassed. It also claimed that Public Procurement Regulatory Authority (PPRA) rules had not been followed and due process was bulldozed.

In a statement issued by Senator Saleem Mandviwalla later on, the politician reiterated the claim that the A-310 had been sold without any award of a tender. “The market value of PIA’s A-310 was in millions of dollars but it was sold for just 5.3 million rupees,” he said.

Notwithstanding the inquiry, the fly-worthy aircraft had been sold for the price of scrap. But after its sale, a tender was finally issued in Pakistani newspapers while the plane was parked in Leipzig. No potential buyer in Pakistan could physically inspect the plane. The advertisement wasn’t printed in German newspapers and that precluded any potential buyers in Europe. The bottom-line, however, was that a tender was issued on an asset that PIA didn’t own at that point.

Such was the gravity of the case that the incumbent air chief, Sohail Aman, issued a statement declaring that if Imran Akhtar is indeed caught by the National Accountability Bureau or the Federal Investigation Agency, the Air Force would not stand by their man (who was in service at the time). A few days later, ISI Chief Rizwan Akhtar resigned from service.

The Case of Administrative Chaos

On December 21, 2016, Prime Minister Nawaz Sharif announced a major reshuffle of the bureaucracy. Pakistan International Airlines (PIA) was without a chairman at the time, as the old one, Azam Saigol had resigned after an aircraft, Pk 661, travelling from Chitral to Islamabad crashed near Havelian. The incident claimed the lives of 47 passengers and crew members. PM Sharif handed PIA to Aviation Secretary Irfan Elahi, marking the latter’s second tenure as chairman of the national flag carrier.

The outgoing chairman had brought in a former professional of German Airlines Lufthansa, Bernd Hildenbrand, first as chief operating officer (COO) before elevating him to the position of acting chief executive officer (CEO). Both Saigol and Hildenbrand had seen an upturn in PIA fortunes—a product of making infrastructural upgrades and changing its branding. New planes were being leased, flights had achieved “90%” punctuality, and PIA passengers had increased by one million.

But of course Hildenbrand was not Elahi’s choice. In fact Hildenbrand was interviewed and hired by former aviation advisor to the PM, Shujaat Azeem. Since the German was over 60 years of age, approval was sought from the PM to relax rules. Similarly, the requirement of a business degree was relaxed as Hildenbrand aviation diploma from Lufthansa was accepted as a valid certification. However, the German later became embroiled in a number of corruption cases — the most prominent of which is the sale of an A-310 aircraft which is currently abandoned at the cargo port in Leipzig, Germany. In February this year, Hildenbrand was removed from his CEO post and demoted to COO once again.

In April this year, he was removed from PIA altogether. Hildenbrand left the country on May 4, 2017 after his name was put on the exit control list(ECL), and mysteriously removed following the German Embassy’s intervention. Interestingly, nothing written in black and white was given to Hildenbrand as an explanation or show-cause notice. The charge-sheet issued to him does not have the chairman’s signature but that of then Human Resources director.

The incoming chairman, Elahi now had to hire a new CEO and a new COO. A new chairman coming into an organization floored by debt ought to have brought in competent professionals to help drag the airline out of the doldrums. Not Elahi—he handpicked the CEO and COO, both of whom did not come from aviation background. Indeed, among the eight candidates (out of 11) who met the criteria set for the CEO’s post were former managing directors of PIA, Ijaz Haroon and Junaid Younus. And yet, Musharraf Rasool Cyan became the CEO while the COO was Zia Quadir Qureshi.

A university teacher by profession and without any aviation experience, Cyan submitted documents with two different dates of birth: the date on his Matriculation certificate is March 12, 1967.The date of birth according to his CNIC is November 4, 1967. According to Chapter 34 of the PIA Personnel Policies Manual, only a matriculation certificate or a valid birth certificate could be accepted at the t8me of hiring. Cyan then had to submit an affidavit declaring that the date of birth on the CNIC is correct.

“This was only a one-time requirement” claims PIA spokesman Mashood Tajwar. “If the discrepancy is solved at the start, then there is no problem.”

Here’s the twist: more than 350 employees have already been dismissed on charges of discrepancies in their dates of birth as detailed on CNIC’s and educational documents. About 250 cases on the same issue are also pending with the PIA administration.

In the case of Qureshi, he assumed responsibilities in PIA on July 14, 2017 on a two year contract. The problem was he would turn 60 on October 30, 2017–three months after being hired. The rules dictate that the PM issue a formal approval for employment if an employee has to work beyond the age of 60 years.

But approval didn’t come easily; PIA had to write twice to the Aviation Division to have it approved from the PM. Terming it a non-issue, Tajwar “believes” this matter has been resolved and approval has been granted.

But both hirings set the tone of Elahi’s PIA. Hirings and firings came on ad-hoc basis, often without any justifications. In Passenger Sales for example, General Manager Nausherwan Adil and Deputy General Manager Zubair Memon were removed from their positions without any accusation. Similarly brief Human Resources Officer Raheel Ahmed as well as general managers Zafar Ali, Akbar Shah and Mahdi Chingezi were all removed from their positions without any charges formally being brought against them.

Well-placed sources claim that those removed from service did not see eye-to-eye with the chairman on many affairs, including double promotions awarded from PG-VIII to PG-X on a single day. In fact the former human resource director, Raheel Ahmed, is said to have been removed after the chairman found out that Cyan and Qureshi’s credentials had been leaked to the media. The chairman assumed Ahmed as the source of the leaks and removed him from service.

Meanwhile, on the PIA WhatsApp group—which is a means of communication between senior officers—there are rumblings of dissent and dismay at how the national carrier is being run. Some senior personnel have announced that they intend to leave the airline rather than being made scapegoats for the questionable decisions being taken by senior bureaucrats, who they feel will escape accountability.

The Case of the Cash Cows

The hallmark of Bernd Hildenbrand’s tenure as the chief executive officer of Pakistan International Airlines (PIA) was to induct new planes into the national flag carrier’s fleet as he went about modernizing infrastructure in the airline.

One of the services started by Hildenbrand was the Premier Service—a deluxe way to travel to London with three aircrafts acquired on a wet-lease from Sri-Lankan Airlines. Six flights were scheduled for London every week, three each from Islamabad and Lahore. Unlike the regular service, the Premier aircraft was equipped with LCD screens and an expensive in-flight entertainment system with 250 channels. Business-class passengers could sleep on flat beds to make their journey more comfortable. The service was inaugurated by former Prime Minister Nawaz Sharif on August 14, 2016.

Although 3.9 billion rupees were spent on launching the service, even its experimental stage was not well thought-out. For example, the airfare for the premium service was not increased while there was just one aircraft doing the rounds and no other back up aircraft was readied. Instead a substantial cost was incurred on specialized crew, new crew uniforms as well as new logo and branding.

The Premier Service bagged 1.8 billion rupees in revenue between August 14, 2016 and December 31, 2016, according to statistics revealed by the Aviation Division at the time. The losses incurred during the same period were 2.1 billion rupees. But perhaps the bigger scam was elsewhere.

The new service offered a complimentary limousine for business-class passengers anywhere within a radius of 25 kilometres from London Heathrow. The usual cost for such a distance is 45 pounds but PIA was paying 95 pounds for each business-class passenger. There were 25 business class seats in the PIA Premier aircraft, and so the amount paid to the limousine vendor for one trip to London was 2,375 pounds. With six flights in a week, the weekly payment to the vendor was 9,500 pounds and the monthly amounts to 38,000 pounds or 5,282,000 rupees.

Here’s the twist: the limousine vendor was the third brother of former ISI chief Rizwan Akhtar and PIA Procurement Director Imran Akhtar.

Another case of dubious intent is that of a Boeing 777 aircraft which was acquired to fly on international routes. When inducted into the fleet, the 777 plane’s original seats needed to be removed and new ones installed, as per PIA seat requirements. Elahi’s PIA engaged with a foreign company for the job, deeming it undoable in Pakistan. This raised many eyebrows but according to PIA spokesman Mashood Tajwar, the dispute is over the number of planes being re-hauled by the company.

Well placed sources claim that payment of a couple of billion rupees was made in advance—against the rules and without a bank guarantee for the job that was yet to be carried out. The job never got done, claim insiders, also alleging that a substantial amount returned to Pakistan in kickbacks.

The Case of the New York Route

Without any warning came the proclamation that Pakistan International Airlines was shutting down its New York City Operations. The argument made was that the expenses incurred by PIA on flying to New York did not make financial sense to the company anymore. Five weekly flights would fly to New York and three other American cities but PIA is now considering surrendering the route altogether. With a significant population of expatriates living in the United States, this decision predictably evoked great hue and cry.

On November 22, 2017, PIA Chairman Irfan Elahi appeared before the National Assembly’s Standing Committee on Parliamentary Affairs to make the claim that, last year, the airline incurred losses of 1.5 billion rupees from its New York operations. He argued that the airline had been saddled with such losses for the past 10-12 years.

When approached, PIA spokesman Mashood Tajwar explained that the route to New York involved a stopover in Manchester. This means that the cost to fly to New York also included airport and cargo handling charges incurred in Manchester. Negating the notion of surrendering the New York route, he termed it the suspension of New York operations.

The additional costs incurred in Manchester are a valid concern, even though the stopover in Manchester is primarily for security checks. Passengers cannot disembark at the airport while the number of new passengers from London to New York is also not significant.

Meanwhile when costs are compared between the New York route and the Toronto route, there is great similarity in the finances expended. The fuel cost is almost the same as is the crew cost (cockpit crew and cabin crew). Costs for landing an aircraft, parking and housing it are the same, and the turn around costs (time during which the aircraft must remain parked at the gate) are also the same. Some insiders question why one route is considered profitable while the other has been shut down.

Notwithstanding the operational details, if PIA’s official version is indeed considered, it begs the question why can’t New York operation be merged with Toronto operations, given that PIA flies non-stop to Toronto. Official word is that Toronto itself is a profit-making route and therefore cannot be saddled with the burden of passengers heading to New York.

On the surface, the logic is sound. But scratch the surface, and the money involved becomes more apparent. Indeed New York is a hub that connects various flights with different destinations, some not even in the United States. Routes are not just obtained for a substantial some of money; their approval is contingent on factors such as power connections and diplomatic relations. And once surrendered, they cannot be re-obtained within a matter of days or months.

In the case of New York, a route surrendered means that flight operations have been given up for good as there are limited number of slots available. Etihad Airways, for example is a recent phenomenon, and when they applied to the John F. Kennedy Airport for a slot, they were turned down simply because the Americans had no space to accommodate another airline.

But PIA can also surrender the route in favour of another airline. Word from the inside is that this route is being surrendered to Etihad Airways, although Tajwar denies such an eventuality. “We are locked in discussions with the Americans to provide us permission to fly directly to New York,” he says. “We aren’t surrendering the route to any Middle Eastern Airlines.”